Liquidity ratios are used to analyze the long-term debt-paying ability and the composition of the financing structure of the firm.

Question

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Liquidity ratios are used to analyze a firm's short-term debt-paying ability, not its long-term debt-paying ability. Furthermore, liquidity ratios primarily assess a firm's ability to meet its short-term financial obligations using its current assets, not its financing structure.

Liquidity Ratios Are Used to Analyze the Long-Term Debt-Paying Ability